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The EU is pressing China to loosen restrictions on exports of rare earths because of an “alarming situation” for the bloc’s car industry, with production lines in danger of grinding to a halt.
European trade commissioner Maroš Šefčovič said he had questioned Chinese commerce minister Wang Wentao about the shortage of vital rare earth elements and magnets in a meeting on Tuesday.
China’s new licensing system for the materials is slowing deliveries to manufacturers of products ranging from cars to washing machines.
The country’s Ministry of Commerce imposed export restrictions on seven rare earth elements and magnets in early April, after US President Donald Trump announced higher tariffs on Chinese products.
The impact is already being felt in the global automotive industry with Ford temporarily halting production at its SUV plant in Chicago last week due to a shortage of magnets. Car executives have repeatedly warned that stockpiles of these rare earth magnets would last only a couple of weeks to a few months.
“I informed my Chinese counterpart about the alarming situation in the EU car industry — the rare earth and permanent magnets are essential for industrial production . . . this is extremely disruptive for industry,” Šefčovič said.
The two had “compared figures” for export licences, Šefčovič said.
“His were much better than mine,” he said. “Carmakers are warning of huge production difficulties in a short period of time. His information was different and he said he’d clarify this as soon as possible.”
Civilian products should be exempt from the complicated licence system, but if that was not possible companies should be able to get an annual approval, Šefčovič argued.
“We said we’d come back to this issue once we clarify data from both sides,” he said.
China accounts for 90 per cent of the processing of rare earth magnets and governments believe that Beijing is exerting economic pressure as global trade tensions heighten.
“The export bans reinforce our will to diversify and perhaps even strengthen the relevance of our focus on reducing dependencies,” the EU’s industry chief Stéphane Séjourné said on Wednesday.
Séjourné announced a list of 13 projects in third countries, including the UK, to secure access to raw materials, which are part of the EU’s critical raw materials strategy to reduce dependencies by 2030.
In a letter to the Trump administration last month, US car industry lobby groups Alliance for Automotive Innovation and the Vehicle Suppliers Association said Chinese delays in issuing the export licences were “leading to major disruptions in the global supply of needed elements”.
EU officials said several member states had raised the issue in recent days and national leaders had also discussed it.
Maximilian Butek, an executive director and board member of the German Chamber of Commerce in China, said he believed that Beijing was not intentionally trying to curb European companies’ access to rare earths.
China had been reaching out to the EU to try to improve relations, he pointed out.
“I believe that it’s just a bureaucratic monster they [Beijing] created,” he said, adding that the thousands of applications from exporters for licences was probably overwhelming the commerce ministry.
“There are a lot of delegations from China to Germany and a lot of diplomacy. So it seems that China is really trying to create a better atmosphere in its relationship with Europe. So I really don’t think that they would strike this sector now,” he added.
Jens Eskelund, president of the EU Chamber of Commerce in China, said diplomatic and corporate pressure to resolve the rare earth export bottleneck was mounting. “For all of those that have been urging de-risking, this really proves the point,” he said.
China’s foreign ministry spokesperson Lin Jian said last week that the controls “are in line with international practices”.
“They are non-discriminatory and not directed at any specific country. We are willing to strengthen dialogue and co-operation with relevant countries and regions in the field of export controls and are committed to maintaining the stability of global production and supply chains,” he added.
Additional reporting by Joe Leahy and Ryan McMorrow in Beijing